It's the games, STUPID: Sony makes 'about $18' on each PlayStation 4

According to a teardown report from analyst IHS, Sony is making just $18 on each Playstation 4. This may not sound like much, but it marks a massive improvement from the days in which the Japanese firm made huge losses on the sale of games consoles.

According to the report, each Playstation 4 costs Sony about $381 to manufacture (including parts and assembly) and sells for around $400.

The full report comes out later today, but AllThingsD got an early glimpse of it.

“If Sony could build the PS4 for a lower cost it would do so, but if history is any indicator, it would also lower its retail price,” says Andrew Rassweiler, an analyst with IHS.

Taken alone, this figure might sound like much of a coup for Sony. However, the Playstation 3 was sold at a huge loss, with every $599 Playstation 3 costing just over $800 to produce.

Beancounters at the Japanese firm might not want to crack out the champagne just yet though. Microsoft's Yusuf Mehdi told the industry website GamesIndustry.biz that he expects Redmond to be making a profit on the Xbox One from the get-go.

"We're looking to be break even or low margin at worst on [Xbox One] and then make money selling additional games, the Xbox Live service and other capabilities on top," he said.

"And as we can cost-reduce our box as we've done with 360, we'll do that to continue to price reduce and get even more competitive with our offering."

The most expensive part of the Playstation 4 is the $100 processor chip made by Advanced Micro Devices, followed by the $88 spent for 16 discrete memory chips.

Rassweiler told ATD that the AMD chip was the largest processor his firm had ever seen, at a size of 350mm². "This chip is just gigantic,” Rassweiler continued. “It’s almost three times as big as the next biggest chip we’ve seen.”

Each Playstation controller costs about $18 to build and contains an audio chip from Wolfson Microelectronics, Qualcomm Bluetooth chips and a motion sensor from Bosch. Mean old Sony are only giving gamers one controller in each box.

Despite what the figures might suggest, Rassweiler reckons Sony won't be making much a profit on each unit. “If your cost is within $10 to $20 of the retail prices, there’s very little chance you’re making a profit on the console,” he added. "It looks like once again, when it comes to profits, it’s all about the game titles,” said Rassweiler. ®